Annual Report and Accounts
Edinburgh Worldwide Inv Trust PLC
07 December 2004
EDINBURGH WORLDWIDE INVESTMENT TRUST plc
Results for the year to 31 October 2004
During the first year of Baillie Gifford & Co's management, the net asset value
per share of Edinburgh Worldwide Investment Trust plc rose by 4.3% while the
share price rose by 6.1%. Over the same period the Benchmark against which
performance is measured, the MSCI All Countries Index (in sterling terms) rose
by 3.4%.
• The approach taken by the new Managers has been to concentrate on companies on an individual basis rather
than pay attention to the composition of indices and benchmark weightings.
• The equity portfolio was reorganised at the start of the year. It is run on a concentrated basis and at
the year end there were 44 equity holdings.
• The Manager Mark Urquhart commented: 'Our current portfolio comprises a collection of businesses where
we are optimistic about the long term growth prospects. We are geographically agnostic - we will buy a
business regardless of where it is listed. At the current juncture we find more opportunities in emerging
markets.'
• A final dividend of 1.70p is being recommended bringing the total for the year to an unchanged 2.20p.
• In the second half of the year net asset value rose by 2.0% while the Benchmark rose by 0.4%
Edinburgh Worldwide aims to achieve long term capital growth by investing in
stock markets throughout the world. The Trust has total assets of £111 million
(before deduction of loans of £28 million).
Edinburgh Worldwide is managed by Baillie Gifford & Co., the Edinburgh based
fund management group with over £31 billion under management and advice.
7 December 2004
For further information please contact:
Mark Urquhart, Manager,
Edinburgh Worldwide Investment Trust plc 0131 275 2070
Robert O'Riordan, Marketing Manager
Baillie Gifford & Co. 07730 412007
Mike Lord, Director,
Broadgate Marketing 020 7726 6111
EDINBURGH WORLDWIDE INVESTMENT TRUST plc
Chairman's Statement
This has been the first year of Baillie Gifford & Co's management of the
Company. The transition has gone smoothly and the results for the year show an
improvement in the Trust's performance.
Markets
For much of the year equity markets were generally dull especially over the
summer months. This belies the fact that company earnings, on the whole, have
shown a marked improvement both in developed economies and in faster growing
emerging markets. Features of the period have been the increasing importance of
China as a global economic force, the weakness of the US dollar and the high oil
price. If there is a cloud on the horizon, it must be the eventual effect of
the US deficit on world economies.
Performance
Net asset value per share rose by 4.3% for the period while the share price is
6.1% higher reflecting some narrowing in the discount. Past performance is no
guarantee of future performance. Performance is measured against the MSCI All
Countries World Index in sterling terms which rose by 3.4% over the period. As
the Managers outperformed the Benchmark a performance fee, now calculated
against market capitalisation rather than net asset value, of £35,000 is
payable.
Revenue and Dividends
The revenue return for the year was 1.77p (2003 - 2.06p) and a final dividend of
1.70p is being recommended to bring the total for the year to an unchanged 2.20p
bringing the revenue reserves per share to 1.25p. While the Company's objective
is growth, the Board is mindful that many shareholders, especially private ones,
wish to see the dividend maintained.
Investment Approach
The approach adopted in managing the portfolio has been to concentrate on
companies on an individual basis rather than pay attention to the composition of
indices and benchmark weightings. While this approach will inevitably result in
periods when the progress of net asset value diverges from the course tracked by
the market as measured by indices, it is one which the Board wholeheartedly
endorses. By taking such an approach the Managers should be able to focus on
their job: identifying individual companies which are capable of delivering and
sustaining growth in earnings and profits over the long term. The equity
portfolio is managed on a relatively concentrated basis and at the year end
there were 44 equity holdings.
Gearing
Throughout the period the Company has remained geared into the market at fairly
constant levels. At the year end the borrowings invested in equities accounted
for 20% of shareholders' funds. The Company has the potential to increase this
level of equity exposure to 33% of shareholders' funds but is unlikely to go to
that level in the foreseeable future. The borrowings not committed to equities
are invested in a bond portfolio which broadly matches the yield, duration and
currency exposure of the outstanding portion of the loans. This strategy has
worked successfully during the year.
Buybacks and Treasury Shares
The power to buyback shares was renewed at last year's Annual General Meeting
but was not used during the year. The Board is asking for the authority to be
renewed at the Annual General Meeting and would consider using it in appropriate
circumstances.
The Board is also seeking powers to hold any shares that are bought back in
treasury for possible future re-issue. Investment trusts have been allowed to
hold shares that have been bought back in treasury since 1 December 2003. The
Board does not intend using these powers to re-issue shares at a discount to
market value but considers that the authority could be useful in a situation
should the shares be trading at a premium and natural liquidity is unable to
meet demand.
Marketing
Baillie Gifford & Co have undertaken a number of marketing initiatives for the
Company during the year, the most important of which has been regular
presentations to existing and potential intermediary and institutional
shareholders and to investment trust analysts. This work is important as it
ensures that investors are able to make informed judgments about the Company.
Other initiatives have been the production of an investment trust magazine,
Trust, the launch of a pension product and the creation of web pages specific to
Edinburgh Worldwide.
Annual General Meeting
The Annual General Meeting will be held at 12 noon on Monday, 31 January 2005 at
Discovery Point, Dundee. The Managers will make a presentation on the portfolio
and there will be an opportunity for shareholders to ask questions and meet the
Directors.
Outlook
The outlook for well managed companies with sound growth prospects remains good.
While inevitably market trends will have an influence on share prices, we
believe shareholders will benefit in the medium term from a portfolio committed
to such businesses.
David A Coltman
6 December 2004
EDINBURGH WORLDWIDE INVESTMENT TRUST plc
The following is the unaudited preliminary statement for the year to 31 October
2004 which was approved by the Board on 6 December 2004. The Board of Edinburgh
Worldwide Investment Trust plc is recommending to the Annual General Meeting of
the Company to be held on 31 January 2005 the payment of a final dividend of
1.70p (1.70p last year) per ordinary share making 2.20p (2.20p last year) for
the year ended 31 October 2004.
STATEMENT OF TOTAL RETURN
(incorporating the revenue account*)
For the year ended For the year ended
31 October 2004 31 October 2003
(unaudited) (audited)
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Gains on investments - 4,387 4,387 - 8,647 8,647
Currency gains/(losses) - 790 790 - (1,497) (1,497)
Income 1,940 - 1,940 2,251 - 2,251
Investment management fee (145) (469) (614) (161) (482) (643)
Other administrative expenses (368) - (368) (424) - (424)
Net return before finance costs
and taxation 1,427 4,708 6,135 1,666 6,668 8,334
Finance costs of borrowings (381) (1,149) (1,530) (416) (1,242) (1,658)
Return on ordinary activities
before taxation 1,046 3,559 4,605 1,250 5,426 6,676
Tax on ordinary activities (177) 89 (88) (243) 60 (183)
Return on ordinary activities
after taxation 869 3,648 4,517 1,007 5,486 6,493
Dividends in respect of equity
shares (1,078) - (1,078) (1,078) - (1,078)
Transfer (from)/to reserves (209) 3,648 3,439 (71) 5,486 5,415
Return per ordinary share
(note 2) 1.77p 7.45p 9.22p 2.06p 11.19p 13.25p
Dividend per ordinary share
(note 3) 2.20p 2.20p
* The revenue column of this statement is the profit and loss account of the
Company.
All revenue and capital items in this statement derive from continuing
operations.
EDINBURGH WORLDWIDE INVESTMENT TRUST plc
SUMMARISED BALANCE SHEET
at 31 October 2004
31 October 2004 31 October 2003
£'000 £'000
(unaudited) (audited)
FIXED ASSETS
Fixed asset investments 111,356 85,298
CURRENT ASSETS
Debtors 1,094 258
Treasury bills - 14,109
AAA money market funds - 8,153
Cash at bank and in hand 547 2,640
1,641 25,160
CREDITORS
Amounts falling due within one year (2,201) (1,450)
Net current (liabilities)/assets (560) 23,710
TOTAL ASSETS LESS CURRENT LIABILITIES 110,796 109,008
CREDITORS
Amounts falling due after more than one year (note 4) (27,604) (29,255)
83,192 79,753
CAPITAL AND RESERVES
Called-up share capital 2,450 2,450
Share premium 82,180 82,180
Special reserve 35,220 35,220
Capital reserves - realised (44,457) (38,940)
Capital reserves - unrealised 7,182 (1,983)
Revenue reserve 617 826
Equity shareholders' funds 83,192 79,753
NET ASSET VALUE PER ORDINARY SHARE 169.76p 162.75p
Ordinary shares in issue (note 5) 49,004,319 49,004,319
DISTRIBUTION OF ASSETS
at 31 October 2004
(unaudited)
31 October 2004 31 October 2003
% %
Equities: United Kingdom 13.8 12.8
Continental Europe 21.0 13.8
North America 31.2 36.5
Japan 5.7 7.5
Asia Pacific 6.9 7.6
Emerging Markets 11.8 -
Total equities 90.4 78.2
Sterling denominated bonds 1.3 -
US$ denominated bonds 6.0 -
Yen denominated bonds 2.8 -
Net liquid (liabilities)/assets (0.5) 21.8
Total assets (before deduction of loan) 100.0 100.0
EDINBURGH WORLDWIDE INVESTMENT TRUST plc
SUMMARISED CASH FLOW STATEMENT
For the year ended For the year ended
31 October 2004 31 October 2003
(unaudited) (audited)
£'000 £'000 £'000 £'000
NET CASH INFLOW FROM OPERATING ACTIVITIES 1,092 1,200
NET CASH OUTFLOW FROM SERVICING OF FINANCE (1,556) (1,687)
TOTAL TAX PAID (95) (176)
FINANCIAL INVESTMENT
Acquisitions of investments (119,127) (55,196)
Disposals of investments 97,310 64,716
Realised currency loss (48) -
NET CASH (OUTFLOW)/INFLOW FROM FINANCIAL INVESTMENT (21,865) 9,520
EQUITY DIVIDENDS PAID (1,078) (1,078)
NET CASH (OUTFLOW)/INFLOW BEFORE USE OF LIQUID RESOURCES
AND FINANCING (23,502) 7,779
NET CASH INFLOW/(OUTFLOW) FROM MANAGEMENT OF LIQUID
RESOURCES 21,409 (12,671)
DECREASE IN CASH (2,093) (4,892)
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
Decrease in cash in the period (2,093) (4,892)
(Decrease)/increase in short term investments (21,409) 12,671
Exchange movement 798 (126)
MOVEMENT IN NET DEBT IN THE YEAR (22,704) 7,653
NET DEBT AT 1 NOVEMBER (4,353) (12,006)
NET DEBT AT 31 OCTOBER (27,057) (4,353)
RECONCILIATION OF NET REVENUE BEFORE FINANCE COSTS AND
TAXATION TO NET CASH INFLOW FROM OPERATING ACTIVITIES
Net revenue before finance costs and taxation 1,427 1,666
Management fees charged to capital (469) (482)
Changes to debtors and creditors (22) 16
Amortisation of fixed income book cost 156 -
1,092 1,200
EDINBURGH WORLDWIDE INVESTMENT TRUST plc
PORTFOLIO AND EQUITY PERFORMANCE
at 31 October 2004
(unaudited)
Market % of Performance+
value total
Name Business £'000 assets Absolute Relative
% %
Moody's Bond rating agency 4,532 4.1 23.3 18.7
Golden West Financial Savings and loans 4,363 3.9 5.1 1.1
Imperial Tobacco Tobacco 4,147 3.7 36.5 31.4
Atlas Copco Engineering 3,314 3.0 11.5 7.3
Gazprom Gas exploration and production 3,181 2.9 28.5 23.7
Samsung Electronics Electronics manufacturer 3,034 2.7 (9.4) (12.8)
Lukoil Oil exploration and production 2,926 2.6 32.7 27.7
Progressive Ohio Non-prime insurance 2,813 2.5 13.7 9.4
Microsoft PC software 2,807 2.5 (1.2) (4.9)
Canon Copiers, cameras and lithography 2,688 2.4 (9.0) (12.4)
SAP Business software 2,619 2.4 6.3 2.3
CNOOC Oil and gas exploration 2,585 2.3 27.0* 23.2*
Teva Pharmaceuticals Generic drugs manufacturer 2,554 2.3 (17.1) (20.2)
Porsche Luxury automobiles 2,492 2.3 15.9 11.5
Ericsson Telecommunications equipment 2,484 2.2 59.1 53.2
M & T Bank Retail banking 2,462 2.2 (0.7) (4.4)
Wal-Mart Discount retailer 2,403 2.2 (15.2) (18.4)
BMW Automobiles 2,394 2.2 (5.4) (8.9)
Petrobras Oil exploration and production 2,222 2.0 47.1 41.6
CVRD Mining 2,205 2.0 22.1* 16.9*
William Wrigley Chewing gum manufacturer 2,198 2.0 8.8 4.7
TopDanmark Insurance 2,125 1.9 32.5 27.6
Wolseley Housing materials 2,096 1.9 33.0 28.0
Zhejiang Expressway Chinese toll-road operator 2,054 1.9 (5.5)* (8.3)*
McCarthy & Stone Retirement home builder 1,956 1.8 19.2 14.7
BHP Billiton Diversified resources 1,898 1.7 20.2 15.8
Omnicom Advertising agency 1,854 1.7 (8.6) (12.0)
Mitsui Sumitomo Non-life insurance 1,833 1.7 (10.8) (14.1)
Vodafone Mobile telecommunication services 1,808 1.6 15.9 11.6
Arisawa Manufacturing Electronic materials 1,761 1.6 7.2 3.2
Mohawk Industries Carpet wholesaler 1,731 1.6 5.1 1.2
Taylor Nelson Sofres Market research 1,730 1.6 7.7 3.7
Sandvik Engineering 1,709 1.5 12.2* 6.8*
Wellpoint Managed care operator 1,671 1.5 1.0 (2.8)
Hermes Luxury goods 1,657 1.5 0.3 (3.4)
Banco Popular Espanol Commercial bank 1,648 1.5 5.7 1.7
Jardine Lloyd Thompson Insurance broker 1,646 1.5 (15.9) (19.1)
Iron Mountain Document management services 1,623 1.5 3.3* (0.7)*
Carnival Cruise ship operator 1,587 1.4 12.7* 11.8*
Walgreen Pharmacy chain 1,542 1.4 (6.7) (10.2)
Patterson Companies Dental products and supplies 1,535 1.4 (1.0)* (1.9)*
Tiffany High-end jeweller 1,457 1.3 (43.0) (45.2)
L'Oreal Personal care 1,455 1.3 (14.3)* (18.0)*
ABB Power generation and automation equipment 1,381 1.2 0.6* (2.8)*
Total Equities 100,180 90.4
EDINBURGH WORLDWIDE INVESTMENT TRUST plc
PORTFOLIO AND EQUITY PERFORMANCE (Ctd)
at 31 October 2004
(unaudited)
Market % of total
value assets
£'000
Name
Total Equity Investments (brought forward) 100,180 90.4
Fixed Interest
Sterling denominated bonds 1,430 1.3
US$ denominated bonds 6,621 6.0
Yen denominated bonds 3,125 2.8
Total Fixed Interest 11,176 10.1
Total Investments 111,356 100.5
Net Liquid Liabilities (560) (0.5)
Total Assets at Market Value (before deduction of loan) 110,796 100.0
+ The portfolio was reorganised on 3 November 2003. Absolute and relative
performance has been calculated over the period 4 November 2003 to 31
October 2004. Absolute performance is in sterling terms; relative performance is
against MSCI All Countries World Index in sterling terms.
* Figures relate to part-period returns relating to the holding period of the
relevant stock.
(Source: Baillie Gifford & Co., StatPro).
Past performance is no guarantee of future performance.
EDINBURGH WORLDWIDE INVESTMENT TRUST plc
NOTES
1. The financial statements for the year to 31 October 2004 have been prepared on the basis of the
accounting policies, consistent in all material matters, as set out in the Company's financial statements
as at 31 October 2003.
None of the views expressed in this document should be construed as advice to buy or sell a particular
investment.
31 October 2004 31 October 2003
£'000 £'000
2. Return per ordinary share
Revenue return 869 1,007
Capital return 3,648 5,486
Return per ordinary share is based on the above returns and on 49,004,319 ordinary shares, being the
number of ordinary shares in issue during each year.
3. The total cost of the dividend for the year is £1,078,000 (2003 - £1,078,000). If approved the
final dividend will be paid on 3 February 2005 to all shareholders on the register at the close of
business on 14 January 2005. The ex dividend date is 12 January 2005.
4. The loan includes US$31,250,000, Y1,313,200,000 and £3,800,000 drawn down under a multi-currency loan
facility with ING Bank N.V. (2003 - US$31,250,000, Y1,313,200,000 and £3,800,000). The loan is due
for repayment in July 2008.
5. At the Annual General Meeting on 2 February 2004 the Company renewed its authority to purchase shares
in the market, in respect of 7,345,747 ordinary shares (equivalent to 14.99% of its issued share
capital at that date). No shares were bought back during the year to 31 October 2004 or 2003. At 31
October 2004 the Company had authority to buy back 7,345,747 ordinary shares.
6. The financial information set out above does not constitute the Company's statutory accounts for the
year ended
31 October 2004. The financial information for 2003 is derived from the statutory accounts for 2003
which have been delivered to the Registrar of Companies. The Auditors have reported on the 2003
accounts, their report was unqualified and did not contain a statement under section 237(2) or (3) of
the Companies Act 1985. The statutory accounts for 2004 are unaudited, however it is expected that
the Auditors will issue an unqualified opinion. The statutory accounts for 2004 will be finalised on
the basis of the financial information presented in this preliminary announcement and will be
delivered to the Registrar of Companies following the Company's Annual General Meeting.
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